Economic Analysis of Various Production and Handling Alternatives for Perennial Bioenergy Crops Including Heating a Greenhouse

With the current and future needs for clean, renewable energy, numerous crop plants, often referred to as biomass energy crops, have received significant attention.  Switchgrass (Panicum virgatum) and other warm season perennial native grasses are among those being considered by the U.S. Department of Energy, United States Department of Agriculture (USDA), and others because of their broad geographic adaptation and ability to produce significant amounts of quality biomass even on marginal, non-food crop lands.  While many factors are involved in considering crops like switchgrass as a bioenergy crop, potential economic returns are one of the most important.  We used budgeting and sensitivity analyses to evaluate production of switchgrass with and without irrigation at different yield levels and lengths of stand. We evaluated several cost levels of processing harvested hay into pellet and marketing at the wholesale or retail level verses on-farm use.

Results of the analyses of these various scenarios revealed several trends. Unless both energy prices and yields are high in the seeding year, it does not appear profitable to harvest the 1-2 tons that are generally expected. Estimated established yields ranged from 3 to 5 tons per acre for non-irrigated crops, and from 5 to 8 tons per acre for irrigated crops.   Irrigation costs would need to be under about $20/acre-inch to break even. Costs for pelletizing reported to us ranged from $40-$95/ton depending on the amount of pre-processing, type of equipment, etc. It was difficult to find profitable scenarios, even at high energy prices when those costs exceeded $80/T. Retailing of pelletized biomass was more profitable under all yield levels compared to wholesaling. On-farm use of pellets for home, shop, greenhouse or other heating provided a positive return at all yield levels.  Considering the volatility of oil prices, farmers (such as greenhouse owners) who have requirements for on-farm use, can reduce the input price risk of the cost of fuel by producing their own fuel.  

The costs of baling, transportation and pelletizing were the three highest costs in the overall production. Practices to reduce these costs such as direct flail chopping of dry standing switchgrass, local group processing and/or utilization in raw (non-pelleted) forms could result in substantial cost reductions and the opportunity to realize significant profits for production of biomass energy on non-food crop lands in New Jersey to replace purchased fuel or to retail or wholesale to others.